Put Money in Your Pocket by Building and Protecting your Credit History

Just as your reputation precedes you in life, your credit history tells the financial world all about your prospects as a customer. That makes it integral that your credit report says only good things about you.

Building and protecting your credit history are key steps you can take to get and stay on rock solid financial footing. Good Credit can affect everything, from your ability to take out a favorable car loan or mortgage to renting an apartment, obtaining good insurance rates, or even getting a job.

Achieving a strong credit record is completely in your grasp, whether you are now starting your financial life or aiming to right some wrongs. The effort will pay off because a strong credit score equals real money, giving you access to the capital you want when you want it, at the rates you desire.

To secure and maintain good credit, consider these steps:

1. Start small and early

If you’re seeking to help your children build their credit or bolster your own, it’s important to start small and not over-extend yourself. Open a checking and savings account, along with a debit card, to form the base layer of financial bedrock.

Cultivating a mix of credit also helps. Pair bank accounts with a low-limit credit card or installment loan, like a car note. This helps you establish a history of making timely payments and paying off balances. For people with little or troubled credit, consider asking a relative with good credit to cosign on the loan, helping you scaffold up to strong credit.

2. Pursue stability

Financial institutions and other lenders weigh your longevity with accounts. The longer you maintain bank accounts, credit cards, jobs, or residences, the better your credit score. It demonstrates stability to risk-adverse lenders. Making loan payments on time and paying off credit card balances quickly are additional ways to show stability.

3. Avoid over-use

While good credit surpasses having no credit—and that’s better than having bad credit—it’s important not to over-extend yourself in pursuit of building a credit history. Don’t open four new credit cards in a year. Stop yourself from regularly spending to your limit or piling up loans to pay for college, a car, or home improvements simultaneously. Add credit slowly and live within your means.

4. Build up savings

Having a healthy pot of funds to dip into when the furnace fails or you crave a vacation prevents the need to max out credit cards and then pay high interest rates. This will give you readily accessible money to tap into when you need it, allowing you to open a credit card when the time is right.

5. Rebuild your reputation

When your credit takes a ding from job loss, divorce, or health care bills, there are financial products that can help, such as a cash-secured credit card. Instead of a lender fronting you money, you put up the collateral. Many will report your positive history of timely payments to credit agencies, putting a positive notch on your report.

Some employers also get involved. Many offer employees small loans through programs like TrueConnect that are paid off through paychecks. This, too, helps employees restore credit.

6. Protect your good name

Once you’ve successfully built strong credit—and all along the way—it’s vital to take steps to safeguard it. A key step is to prevent identity theft by regularly changing your passwords. Use complex passwords that are more difficult to hack, including capitalized letters, numbers, and special keys.

In addition, zealously guard your Social Security number and ensure that it stays private by shredding documents with the number. This credential opens doors for data thieves to create new accounts and credit cards in your name, trashing your credit in the process.

7. Monitor, monitor, monitor

Credit bureaus will share your credit history with you annually for free; review their reports for red flags or errors. That way you can take steps to improve bad habits or correct any errors. Also, take advantage of credit bureaus’ offers to monitor your accounts and send alerts if someone is trying to illegally access your credit.

Building a strong credit history takes work, but it’s worth it when it translates to more money in your pocket. Your commitment to financial health pays off in so many ways—in the form of access to capital, convenience, and the best rates.

About The Author

David Reiling

David is a social entrepreneur with a long history of innovation in community development finance. As Chairman & CEO of Sunrise Banks, David’s visionary leadership has positioned his social enterprise for long-term financial sustainability and positive social impact. Under David’s leadership, Sunrise Banks became the first Minnesota bank certified as a Community Development Financial Institution (CDFI), the first Minnesota B Corp, the first Minnesota bank to join the Global Alliance of Banking on Values and one of the first Minnesota Benefit Corporations. David has been recognized by Trust Across America as one of “Top 100 Thought Leaders in Trustworthy Business” for the past four years, earned an Ernst & Young “Entrepreneur of the Year” award, been named Finance & Commerce’s “Innovator of the Year,” received Minnesota Business Magazine’s “Good Leader” award, earned the Corporate Citizenship Award from the U.S. Chamber of Commerce’s Center for Corporate Citizenship and won a Stevie Award for Best Corporate Social Responsibility Program. A recognized leader in opening the doors of financial inclusion and financial wellness, David has built his social enterprise on the premise that everyone can gain access to convenient, transparent and reasonably-priced financial services nationally and globally David has appeared on Minnesota Public Radio and the BBC, and has been quoted in the U.S. New & Report, Minneapolis Star Tribune, Twin Cities Business Magazine, Independent Banker and the Minneapolis/St. Paul Business Journal. He has authored articles for Green Money Journal, the St. Louis Federal Reserve, on Philanthropy.com and paybefore.com. He has been invited to speak at the Federal Reserve Bank of Chicago, the Interagency MDI and CDFI Bank Conference, the Net Impact Conference and the Sustainable and Responsible Investing Symposium. He has lectured on community development banking topics to numerous schools, nonprofits and civic organizations. Tweet him @reilingdavid